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In microeconomics theory , an indifference curve is a graph showing different bundles of goods between which a consumer is indifferent . That is, at each point on the curve, the consumer has no preference for one bundle over another. One can equivalently refer to each point on the indifference curve as rendering the same level of utility (satisfaction) for the consumer. In other words an indifference curve is the locus of various points showing different combinations of two goods providing equal utility to the consumer. The main use of indifference curves is in the representation of potentially observable demand patterns for individual consumers over commodity bundles. The Ordinal Approach to Consumer Equilibrium asserts that the consumer is said to have attained equilibrium when he maximizes his total utility (satisfaction) for the given level of his income and the existing prices of goods and services. The ordinal approach defines two conditions of consumer equilibrium: Necessary or First Order Condition and Supplementary or Second Order Condition . Necessary Condition or First Order Condition: Under the first order condition, the consumer reaches his equilibrium in the same manner as he does under the cardinal approach of the two-commodity model. It is expressed as: By implication, Thus, the necessary condition of the cardinal approach to consumer equilibrium can be written as: Supplementary or Second Order Condition: The first order condition is necessary but not...

nt. Thus, the second order or supplementary condition requires that the necessary condition must be accomplished at the highest possible indifference curve on the indifference map. In the figure above, there are three indifference curves, Viz. IC1, IC2, and IC3 presenting a hypothetical indifference map of the consumer. AB is the hypothetical budget line. At point ‘E’, the indifference curve IC2 and Budget line AB intersect and hence, therefore, the slope of IC2 = AB. At this point, both the necessary condition and the supplementary condition get fulfilled, and hence, the consumer attains equilibrium at point ‘E’. We know that between any two points on the indifference curve: ΔY. MUy = ΔX. MUx Thus, the slope of the indifference curve can be written as: The slope of budget line is given as: In the figure above, at point ‘E’, MRS x, y = Px /Py and hence the consumer is said to have attained equilibrium at this point. The IC2 is tangent with the budget line AB, which shows that the consumer has reached to the highest possible indifference curve for a given level of his income and the market price of goods and services. Thus, at point ‘E’ consumer consumes quantity OQx of X and OQy of Y, which yields him the maximum utility or satisfaction.

What are indifference curves? Explain the consumers’ equilibrium under the assumptions of ordinal approach .

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In microeconomic theory, an indifference curve is a graph showing different bundles of goods between which a consumer is indifferent. That is, at each point on the curve, the consumer has no...